Summary
Elastic reported revenue of $144.9 million for the second quarter of fiscal 2021, up 43.3% from the prior-year quarter and 40% on a constant currency basis. Gross profit rose 47.1% to $106.4 million, and gross margin improved to 73.5% from 71.6%. The GAAP losses narrowed substantially. Operating loss was $28.4 million with an operating margin of -19.6%, compared with an operating loss of $52.0 million and a margin of -51.4% a year earlier. Net loss was $29.2 million and diluted EPS was -$0.34, against a net loss of $50.0 million and EPS of -$0.64 in the prior-year quarter. Year to date, revenue was $273.8 million, up 43.5%, gross profit rose 47.6% to $200.5 million, the operating loss narrowed to $57.9 million, the net loss narrowed to $48.2 million, and diluted EPS improved to -$0.56.
Customer metrics kept climbing. Total subscription customers were over 12,900 as of October 31, 2020, compared with over 9,700 a year earlier and over 12,100 at the end of the first quarter of fiscal 2021. Customers with annual contract value above $100,000 numbered over 650, versus over 525 a year ago and over 630 in the prior quarter. The net expansion rate remained above 130%. Deferred revenue was $309.2 million, up 53.6% year over year, and remaining performance obligations were $643.5 million, up 57.0%, which points to a growing contracted backlog. Cash and cash equivalents were $349.0 million as of October 31, 2020.
Cash generation was the weak spot. Operating cash flow was -$17.3 million in the quarter, down from positive $0.3 million a year earlier. Through six months, operating cash flow was $4.7 million, up from negative $1.4 million. Free cash flow, a non-GAAP measure, was -$18.6 million for the quarter, and capital expenditures were $1.3 million, down 22.4%.
Guidance covers the third quarter of fiscal 2021, which ends January 31, 2021. Revenue is expected to be between $145 million and $147 million, with a non-GAAP operating margin between -8.5% and -7.5% and a non-GAAP net loss per share between $0.16 and $0.14. For the full fiscal year ending April 30, 2021, revenue is expected to be between $568 million and $572 million, with a non-GAAP operating margin between -7.0% and -6.0% and a non-GAAP net loss per share between $0.40 and $0.32.
Product activity was heavy. Elastic shipped version 7.10 of the Elastic Stack, which added a beta of searchable snapshots for storing and searching more data with control over cost and performance, and made Kibana Lens generally available for drag-and-drop visualization. Enterprise Search gained connectors and single sign-on, Observability added user experience monitoring and one-click anomaly detection, and Security extended detections for cloud and remote users. Elastic Cloud became available in three new regions, AWS Mumbai, Azure Iowa and Azure New South Wales, for a total of 42 regions. The first virtual ElasticON Global drew more than 25,000 registrations and 300 sessions. Headcount was 2,029 as of October 31, 2020.
Management framed the outlook cautiously. The guidance assumes near-term business headwinds from the COVID-19 pandemic, and the filing cites delayed purchasing decisions, longer sales cycles, delayed professional services projects, reduced renewals, and pressure on calculated billings and the net expansion rate. Elastic Cloud is growing faster than the rest of the business, and hosting costs weigh on gross margin. The company plans to increase investment over the remainder of fiscal 2021 after temporarily slowing it, has historically incurred operating losses and negative cash flow from operations on an annual basis, and may need to raise additional equity or debt. Travel savings tied to the pandemic helped margins and are expected to continue in the near term.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q2 FY2021 | Q1 FY2021 | QoQ | Q2 FY2020 | YoY |
|---|---|---|---|---|---|
| Revenue | $144.9M | $128.9M | +12.4% | $101.1M | +43.3% |
| Gross profit | $106.4M | $94.0M | +13.2% | $72.3M | +47.1% |
| Gross margin | 73.5% | 73.0% | +0.5 pp | 71.5% | +1.9 pp |
| Research & development | $46.7M | $45.7M | +2.2% | $38.5M | +21.3% |
| Sales & marketing | $64.5M | $56.2M | +14.8% | $54.0M | +19.4% |
| General & administrative | $23.7M | $21.7M | +9.1% | $31.8M | -25.5% |
| Total operating expenses | $134.9M | $123.6M | +9.2% | $124.3M | +8.5% |
| Operating income (loss) | -$28.4M | -$29.5M | +3.7% | -$52.0M | +45.3% |
| Operating margin | -19.6% | -22.9% | +3.3 pp | -51.4% | +31.8 pp |
| Net income (loss) | -$29.2M | -$19.0M | -53.5% | -$50.0M | +41.7% |
| Net margin | -20.1% | -14.7% | -5.4 pp | -49.4% | +29.3 pp |
| Customers | 12,900 | 12,100 | +6.6% | 9,700 | +33.0% |
Risks
The ongoing COVID-19 pandemic has caused delays in purchasing decisions, longer sales cycles, reduced renewals of existing subscriptions, and delayed implementation of professional services, resulting in headwinds for calculated billings and the Net Expansion Rate as stated in MD&A. The full extent of the impact remains uncertain and could continue to harm results.
Because open source licenses allow third parties to access and redistribute source code, competitors including Amazon Web Services can offer SaaS based on Elastic's open source components without Elastic support or proprietary features, potentially reducing demand and pressuring pricing. Elastic states Amazon competes for potential customers and its offerings may limit Elastic's ability to adjust product prices.
The length of Elastic's sales cycle can be unpredictable and extend to more than a year for some customers, and MD&A says COVID-19 has led to longer sales cycles and delayed purchasing decisions. A lost or delayed large transaction can affect quarterly cash flows and results because a substantial proportion of expenses are relatively fixed in the short term.
Elastic expects a significant portion of revenue from renewals, but customers have no contractual obligation to renew; MD&A cites reduced renewals of subscriptions by existing customers due to COVID-19 and headwinds for the Net Expansion Rate. The Net Expansion Rate was over 130% for the three months ended October 31, 2020 but could decline.
As a provider of security solutions, Elastic may be specifically targeted by bad actors for attacks intended to circumvent its security capabilities as an entry point into customers' endpoints, networks, or systems. Security risks are heightened during the COVID-19 pandemic as more individuals work remotely and use home networks.
Elastic has a history of losses, with a net loss of $48.2 million in the six months ended October 31, 2020 and an accumulated deficit of $532.0 million as of October 31, 2020. The company expects to continue incurring operating losses and negative cash flows from operations on an annual basis for the foreseeable future.
Elastic Cloud contributed 26% and 20% to total revenue for the six months ended October 31, 2020 and 2019, respectively, and the company expects Elastic Cloud's contribution to subscription revenue to increase over time. That mix shift could adversely impact gross margin because of associated cloud hosting costs.
Elastic depends on executive officers, including CEO and Chairman Shay Banon, and on skilled engineering, sales, and support personnel; competition for such personnel is significant and COVID-19 may make recruiting, onboarding, and training harder. The company moderated hiring pace amid the pandemic and must hire and train effective sales personnel to grow revenue.
Operating cash flow was negative $17.29 million in FY2021 Q2, down $17.58 million from positive $0.29 million in FY2020 Q2; for the six months ended October 31, 2020, operating cash flow was $4.71 million. The company may need additional capital if it cannot fund strategic initiatives.
SaaS KPIs
All quarters →Net Expansion Rate
Non-GAAP Operating Margin
Total subscription customer count
Calculated Billings
Free cash flow
Free Cash Flow Margin
Summary, forecast, risks and KPIs are extracted from Elastic N.V.'s SEC filings for Q2 FY2021 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 2, 2026.